Effect of using your personal car for business on auto insurance coverage

By Hayden KruegerPublished: Saturday, April 10th, 2010

Are you thinking of taking up catering as a home based business? It’s a very good idea. Considering that there is a huge number of students and office going bachelors and bachelorettes looking for some home cooked food. But are you thinking of using your minivan which you already own? Well, you will need some additions to your auto insurance policy in that case. You can avail business auto insurance on such vehicles that are used for commercial purposes.

Almost all insurance companies will not reimburse you for losses that you suffer while using your vehicle for business purposes while owning a personal or private auto insurance policy. You need to own a separate business or commercial auto insurance policy in addition to your regular policy. Or if you have been with a company for a long time and can establish that you are just going to be doing a part time gig with your car, you can get some leeway.

Pizza delivery is a prime example of such a gig. Lots of people do it; in fact a lot of students take it up as a part time job by using their personal car. And little are they aware that they will not get a pie if the insurance company finds out that the person was hauling pizza when the accident occurred.

Other such jobs would include catering, door to door consulting services, day care services, landscaping or snow plowing services. If you ever take up or are already involved in such activities, it is better to consult with your insurance agent to find out whether you will be covered in the event of an accident. Or the other option is to follow the ‘don’t ask don’t tell policy’! if ever you meet with an accident while delivering pizzas, you can end up saying you have a house party. But if the gig that you are doing was in some way responsible for the accident, it is always the right thing to do to admit your fault. Else you could be charged with auto insurance fraud. In such cases you will not get your coverage and will end up losing your premium. And you could also end up with a jail sentence if the fraud is serious.

You would need a commercial policy if you are going to be hauling stuff heavier than 500 pounds. This could include tools, garden equipment or anything else that you are carrying.

If you are driving all the neighborhood kids to school for money, again you would need a commercial policy. Basically, anything that results in you being paid will constitute as commercial activity. In fact, real estate agents will also qualify for commercial insurance.

And if you have employees in a business and they borrow your car, you will not be covered for any loss or damage to your vehicle. This is a major blow to many people. A lot of people are not aware of this and end up losing a lot of money. Lending your car to your favorite employee might feel like the right thing to do, but next time its better you let him know that any damage would have to be borne by him!